One of my daily newspaper colleagues wrote a story Sunday whose headline should serve as a wake up call to the beleaguered media industry: “Dollar’s fall forces new standard of frugality.” It’s a good piece that notes what may seem obvious — the probable recession, the mortgage bust, the persistent trade deficit and the sudden distaste of foreign investors for American debt will restrain the credit-driven consumption binge that can no longer be sustained.

Now let’s think about that in the context of a mass media industry in which display advertising money is being shifted to search-driven queries and sponsorship advertising at far lower cost per thousand than newspapers of television. The TNS Media Intelligence snapshot in 2007 repeated the trend we already know — newspaper and television post declines, Internet posts double digit growth.

Now the nation has slipped into what appears to be a housing-driven recession of uncertain depth and duration. What happens when advertising spending, pegged to economic growth, shrinks? The data suggest that advertisers are looking for new and supposedly more cost effective ways to spend money. When Advertising Age surveyed the media job scene earlier this year marketing grew off the charts. Spenders are using blogs and social networks to burrow inside peer groups (the AdAge article is behind a firewall; a past blog entry has excerpts).

Mass media advertising that rains down on the general populace is so 20th Century. Mass media are already being clobbered by Google et al on display ads. Craigslist and its fellow travelers are cashing in on classifieds. Now comes a spending contraction coupled with a shift in advertising fashion.

When does the news start to get good? Well not now because I truly believe that we are entering a period on which the word “frugality” is likely to make a lot more headlines. We may be coming to the end of 80 to 100 years of a consumption economy and a mass media that coexisted quite nicely inside a cocoon of ever-increasing spending on creature comforts encouraged by advertising messages that encouraged that consumption.

And my point? Advertising is not going to completely evaporate but it will never come back the way it used to be for the times they are a changing. The audience is changing. And that means that as we look for a new business model we have to take our cue from the times. We live in a knowledge economy. We are told knowledge is power. Does it not therefore follow that knowledge is also valuable and can therefore command money?

Tomorrow I will outline how journalism can stop being the “Extra, extra, read all about it!” loss leader for advertising — and start to bring home the bacon by selling information, connections and community.